It can't be often that a defeated party draws level in the polls with a new government just 100 days after losing a general election. Tuesday's Guardian/ICM poll shows Labour and the Conservatives neck and neck for the first time since 2007 and the election that never was.

The contrast with the past couldn't be starker. Labour's loss in 1979 and the Tories' defeat in 1997 led to long periods in the wilderness for both parties, with the real possibility of never winning again openly debated.

It's no surprise that it is Nick Clegg's party that has taken the biggest hit. He has traded his party's principles for a clutch of cabinet seats and precious little influence. The poll confirms that more people see a party propping up a Conservative-dominated government than the partnership presented. The public gave David Cameron and Clegg their honeymoon but are now clearly seeing the rightwing nature of the government they didn't elect.

Where Labour had set out a credible deficit-reduction plan, the coalition has embarked instead on cuts that are nothing more than "ideology dressed up as necessity", as Alistair Darling has rightly put it. The danger the country faces is not deficit deniers, which Labour were not and will never be, but deficit fanatics whose obsession risks plunging us back into recession.

It was Labour's belated industrial activism that was exactly the economic intervention needed in a downturn. Now, thanks to their ideological hatred of an active state, the coalition dismantles regional development agencies and axes loans to companies such as Sheffield Forgemasters, vital to our technological competitiveness.

At a time when it's tough to get on the employment ladder, kicking away the first step up that was Labour's future jobs fund at the same time as removing 10,000 university places is callous. It's also economically illiterate, hiking welfare costs and reducing tax take.

The reality that it is ideology driving this government is nowhere more evident than in the wasteful £3bn, top-down reorganisation of the NHS – the age of austerity suspended when there's a free market to introduce to the NHS.

Meanwhile, raising the most unfair tax, VAT, will deliver a £389 tax bombshell to every family while cutting benefits for those most in need. It is simply a lie that "we are all in this together" when, as the Guardian rightly says, the cuts "impact more heavily and unfairly on the poor than on the rich".

Despite the coalition's determination to frame the argument differently, Labour's task must be to demonstrate there is always an alternative. The right's stranglehold on this government is ensuring that the public is beginning to see the dangers of the coalition's approach and it is being reflected in the polls.

However, Labour cannot afford to be complacent. It mustn't assume that increasing unpopularity for the coalition in the polls will automatically translate into victory at the next election. Not least when they are set on gerrymandering boundaries to boost Tory seats.

Instead, as Ed Miliband has argued, Labour must change to win and change as fundamentally as we did as a party in 1994. That means leaving New Labour orthodoxies behind, in the same way as we left old Labour orthodoxies behind back then. Narrowing the gap between rich and poor. Valuing and protecting civil liberties. Imposing limits on where the market holds sway. All areas where we become trapped in old thinking.

That's why it has been so vital that Labour has had a serious leadership contest. This time there has been no coronation and no backroom deals, ensuring that ideas are debated and candidates tested. As a result, I believe we will emerge in a much stronger position to build on our current level of support and take on this coalition.